Don't Cave In On Tax Breaks

June 3, 1985

Kill more loopholes still. That should be Congress' motto this month while working on President Reagan's new tax reform plan. That means standing up to lobbyists defending the more than 65 loopholes that the Reagan plan would cut. And it means that the public should beware of politicians asking that ''just this one'' tax break be restored.

Yes, the White House hit list includes not only outrageous loopholes but also some defensible ones. The reason is simple: The lower tax rates would cost the Treasury $50 billion in 1987, money that must be made up. So as lobbyists and politicians chip away at the Reagan plan, they better have an extraordinary argument for putting any loophole back in -- and a plan for raising that money somewhere else. So far, the loophole lobbyists haven't made a good case.

On the outrageous side, consider the tax deductibility of entertainment costs. Businesses now can get a tax break on season tickets for the New York Yankees or sky boxes for the New Orleans Saints. Executives for professional basketball and hockey estimate that businesses buy more than half of their seats. The White House plan rightly would stop that.

But sports big shots aren't the only ones lined up to keep lucrative subsidies for fun. Restaurateurs want Uncle Sam to keep sharing the tab for business executives who dine on the finest cuisine. Cruise ships want to keep the subsidy for seafaring seminars. Mr. Reagan's crackdown on write-offs for dining, travel and entertainment would raise $1.2 billion. That's the least Congress should do.

Among the more reasonable-sounding tax breaks that the Reagan plan would end are the special deduction for two-earner couples and the tax break from averaging income that is unusually high one year. The first was justified to keep the tax system from penalizing couples for marrying; the second was meant to cushion workers with up-and-down incomes. Those problems are less substantial under the administration's plan because it would lower the maximum tax rate to 35 percent. So ending those two breaks is a sensible part of the price for major reform.

That overall goal of simplicity is what Congress must remember in fending off the special pleaders -- from steelmakers grabbing for their share of $30 billion in investment tax credits to free-lance writers fighting the plan's slight tightening on small-time business expenses. The big boys will swear they can't survive without their big breaks. The small fries will fight for their loopholes with the opposite line: Come on, congressman, you'll hardly feel these few millions. Congress must refuse these pleas large and small.